This article was written before the HB10-1001 passed the Senate on March 5, and so focuses on the arguments for and against. Read on, and you’ll see why I think the passage was a good idea. I’m publishing now without updating what follows because it looks like I’ll be the first to break the news. Please bear with any typos, my proofreader has not had a chance to see this yet. The full text of the bill is here. All that is needed to pass this bill into law is for the House to approve minor amendments made in the Senate, and Governor Ritter’s signature. Neither is expected to be a barrier to adoption.

Tom Kornad, Ph.D.

Colorado has a good chance of increasing the requirement for electricity from renewable sources for the second time since I’ve been blogging here. When I moved to Colorado in 2005, the state had recently passed the first renewable energy standard (Amendment 37 or A37) to be directly approved by voters in the United States. A37 required that the state’s investor owned utilities (Currently Xcel Energy (XEL) and Black Hills (BKH) to produce 15% of their electricity from renewable sources, with a small set-aside for solar and residential solar by 2020, 15 years in the future at that time.

The reason A37 was voter-approved was not because the state was trying to capture some "first" but because of steadfast opposition in the Colorado Legislature from many of the state’s leading politicians. As of April 2009, Xcel was getting, 10% of its electricity from non-hydro renewable generation (mostly wind), and the cost of that achievement has been a surcharge (called the RESA or Renewable Electricity Standard Adjustment) on our electric bills of 0.6% until after the first doubling of the RPS, and stayed at 1.4% for at least a year after the first doubling. The the current House Bill 10-1001 (HB1001) raises the standard to 30% without raising the statutory cap on the RESA, although the full 2% will most likely to be needed. Yes, our transition to clean energy costs money, but it is altogether lower than the costs caused by constant fluctuations in natural gas and coal prices.

Andrew Winston, in the Plenary address at this year’s Sustainable Opportunities Summit the next day described the debate currently going on on in Washington DC as surreal. He likened Climate Change to a bunch of people in a house where one room is on fire. The current discussion at the international level he thought was analogous to debating about who started the fire and who should put it out. The debate in Washington, DC, he likened to debating if the room is actually on fire.

The debate in Colorado is often similarly surreal. The opposition to the bill, which came more from committee member Lundberg rather than the people who testified, centered on cost. Keep in mind that the cost is capped at 2% of electric bills… if the target cannot be met within this cost, the target will not be met. More intelligent (if not completely accurate) opposition came from the Oil and Gas industry. Officially, they were neutral on the bill, but opposed it on the ground that wind in Colorado has not reduced pollution in Colorado, because wind variability has forced existing coal plants to ramp up and down faster than they were designed to do. This makes them run less efficiently, and emit just as many pollutants such as SOx, NOx, and particulates, even though they are producing less power. Further, there are plans to close most of these coal plants by 2017.

The oil and gas argument about a lack of reduction in pollution from coal plants is more serious than the cost argument, but still does not stand up to scrutiny. First of all, they are focusing on conventional pollutants, not Greenhouse Gasses, which are what we are most concerned about. More importantly, there are already a couple of factors in place which will help to mitigate the problems which cause the quick ramping to diminish. I just recently wrote about better predictive software which allows utilities to predict wind production much more effectively. What forces Xcel to ramp their coal plants quickly is not that wind power is variable so much as the fact that the utility gets surprised by quick changes in wind output. When a utility knows that wind ouput is going to rise by 100MW an hour ahead, they can start lowering the output from their coal plants slowly in the time, and replacing that power with power from natural gas, which can ramp up and down much more quickly.

Second, as we get more renewable electrity on the system, we will also have more diverse electrity sources on the system. Right now, most of the wind farms in Colorado are located in the Northeast of the state. This clustering is because that corner of Colorado not only has a good wind resource, and also has available existing transmission lines to bring the wind power to the load centers in Denver and the Front Range. That means that wind power production in Colorado is mostly a function of the wind in Northeast Colorado. The lesson here is not that we should not add more renewable electricity to the grid, but that as we add non-wind renewables, and wind in other parts of the state. Adding large wind farms in other parts of the state requires new transmission. The main barrier against new transmission is not cost, but the difficulty of permitting and the time it takes to build. But Colorado is working to overcome this barrier by looking ahead and and planning the transmission we need for wind and other renewable resources ahead of time. I wrote about a report that came out of this process and the cost of transmission a couple months ago, and some new projects are alredy well into the planning stages.

Other renewables are not at all correlated to the existing wind power in the Northeast of the state. Solar power is also variable, but it forms a natural complement to wind, because wind in Colorado tends to peak at night in the winter, while sun is most abundant during the day in the summer. Other renewables such as cofiring biomass, such as a recent project from Colorado Springs Utilities, are baseload power, and small hydropower has some variablity depending on stream flows, but it is completely uncorrelated with wind.

Just like in a stock market portfolio, a diversified portfolio of energy sources leads to a less variable and more stable grid. Diversified energy sources not only means power from a variety of sources, but also geographic divesity. HB1001 has a 1.5% set aside for Distributed Generation (DG), which means (in the context of this bill) renewable generation that does not require new electricity distribution facilities. By definition, DG will not be big wind in the Northeast corner of the state. Much of it will be solar, bit it also opens the field to small scale biomass, hydropower in water municipal water and sewage systems, and biogas electricity from anaerobic digestion. There was some opposition to this set-aside from interests that worry that building any renewable generation other than big wind would cost too much, but this set aside is an investment in diversification. Yes, many of these diverse resources cost more now than large wind turbines, but they are an investment today in establishing new industries and technologies which can then get to a scale where they can contribute to a diverse and more robust electric grid.

If the financial crisis taught us anything, it should have taught us that a single-minded focus on short term return and projections from complex models, leads to fragile financial systems. A single-minded focus on electricity generation that has the lowest cost similarly leads to a fragile electric grid. Utility least cost planning is driven by cost models for the price of each form of generation, and models for the prices of the fuels which go into them. We need to acknowledge that our models have been flawed in the past, and will continue to be flawed in the future. Predictions of fossil fuel prices are more often wrong than right, and even the projections of the cost to build generation are often wrong as well.

Since we know that the cost models are wrong, but we don’t know how they are wrong, it makes sense to make sure that we invest in electric resources that may not appear to be lowest cost when we run them through those models, but which add diversification and resilience to our electric grid in preparation for the day when the models fail. That day does not have to be a catastrophe like the financial crisis, but a crisis is more likely if we put all our faith in least cost modeling and don’t want to pay an extra 2% for renewable energy insurance.